Bata India Q1 FY27 earnings call

Bata India reported a turnover of INR 979 crores in Q1 FY27, marking a 4% growth year-on-year. This growth was equally split between volume and value. The underlying Profit Before Tax (PBT) demonstrated robust growth of approximately 22% during the quarter.

The company's growth was broad-based across various channels, with ZBM (Zone Business Manager) contributing to nearly 800 stores and the franchise network expanding to 750 stores. Healthy growth was also observed across all e-commerce channels and multi-brand distribution outlets. Strategic focus areas include enhancing retail experience, improving accessibility through expansion, and reimagining the product funnel, which is expected to show significant changes by March 2027.

Raw material prices, particularly for synthetics and crude oil derivatives, resulted in a cost push of 5-6%. To counter this, Bata implemented commensurate price increases, with the impact on new stock expected to be visible around September due to existing inventory. Gross margins experienced a dilution of approximately 100 basis points due to a shift in channel mix towards faster-growing, lower-margin franchise and e-commerce channels, though adjusted for this, gross margin would have improved by 130 bps.

Bata India achieved a significant milestone by expanding its Exclusive Brand Outlet (EBO) network to over 2,000 stores. This network includes approximately 1,250 COCO (company-owned, company-operated) stores and 750 franchise stores. Within the COCO stores, 775 ZBM-contributing stores account for 80% of the revenue. The company expresses a desire to move towards 3,000 EBO stores in the coming future and is working on 'Project Elevate' (ZBM 2.0) for further optimization.

Hush Puppies and Floatz led the brand performance with strong sequential and year-on-year growth rates. The Bata brand also performed well, particularly in the ladies' category, supported by a campaign with Taapsee Pannu. However, the NorthStar brand was a drag, and the company is rationalizing its lines to introduce a much stronger collection in the next couple of quarters. The reimagined product funnel, focusing on design, comfort, and technology, is expected to improve the portfolio and drive higher average selling prices (ASP).

Ad spend increased by about 25% year-on-year, and the company anticipates elevated marketing spends in the coming periods to support new product launches and drive sales growth. Inventory management continued to improve for the second consecutive year, with stock turns at 2.5+, now edging towards 2.7, while maintaining high availability and full-price sales close to 90%.